Foreign Relations of the United States, 1961–1963, Volumes VII, VIII, IX, Arms Control; National Security Policy; Foreign Economic Policy, Microfiche Supplement

359. Memorandum of Conversation between President Kennedy and German Federal Minister Krone, May 15¹

May 15, 1963

SUBJECT

• Balance-of-Payments and Trade Problems

PARTICIPANTS

• • GERMANS
  • Dr. Heinrich Krone, German Federal Minister for Special Problems
  • Ambassador Heinrich Knappstein
  • Counselor Heinz Weber (Interpreter)
• • AMERICANS
  • The President
  • Assistant Secretary William R. Tyler
  • Mr. Robert C. Creel, Director, GER

Following opening amenities, in which Dr. Krone extended his congratulations on the successful launching one hour earlier of the Faith 7 space capsule, Dr. Krone said that he had had talks with both Chancellor Adenauer and Vice Chancellor Erhard just before leaving on his trip and both had specifically asked him to convey their best wishes and greetings to the President. Dr. Krone said he had already had extensive and very useful talks here with Secretaries Rusk and McNamara and other U.S. officials. He would be glad to answer any questions the President might have.

The President said that relations between the U.S. and the Federal Republic were proceeding on a satisfactory basis. He was appreciative of the attitude shown by the Germans toward the MLF project, on which a general meeting of minds had been reached between us. The task now was to secure the participation of other major powers. The President was hopeful on this score. The contributions being made by the Federal Republic in building an expanded Atlantic community were very helpful. As concerned the military situation and Berlin, we were in a better position than in 1961. The primary problem facing us now was the economic situation, not only as concerned internal economic problems in Europe and America but on the international level. He was concerned that we should not let our monetary systems control us to the point of deflation or of producing an imbalance in the community. The President did not think the Soviet Union would make any move against Berlin at this time. For one thing this would involve them in a direct confrontation with the U.S.; for another, they undoubtedly felt themselves to be in an exposed position in Cuba. Berlin was in a more secure position than it had been during the last four or five years. If we all met our obligations in the defense field, he felt that Europe would be in a relatively well protected position. Our primary job was to prevent an economic slowdown (he mentioned concern in this connection over the situation in Italy, Greece, Portugal and Spain), and he felt this was the central problem right now as concerned the defense of the Western community. We had had an outflow from the U.S. over the past seven years of $15 to $20 billion. This could not continue, bearing in mind that the U.S. was responsible for the liquidity of the Western community. It was essential that trade policies be developed which would enable us to meet our international obligations and at the same time permit the Western economy to continue to expand.

Dr. Krone said he was struck by how much the President had emphasized economic factors and problems. He had heard the same concern expressed on Capitol Hill yesterday. Everyone in Bonn, and this included the Chancellor, fully realized the importance of these factors to the U.S. and their relationship to our balance-of-payments problem. Since 1949 the Germans had carried forward a clear and consistent policy of partnership with the Free World. For a number of years there had been some resistance from other political parties in Germany to this policy but at the present time all parties were united in support of it. He considered the internal situation in the Federal Republic to be better than in some other European countries, and this was a stabilizing factor for Europe as a whole. The big problem was the farmers, who had political importance disproportionate to their numbers. It would be the Federal Government’s policy to try to bring about changes in the German agricultural and crop structure (he mentioned particularly vegetables) in the interest of the common good. While he was no technician on this subject, he was fully aware of the political significance of the agricultural problem and wished to assure the President the Germans would do their best to help.

The President said that while his concern was partly with our own farmers, it was more generally with the balance-of-payments problem. No other country could continue to accept the prospect of losing $3 billion a year. In addition to the amounts spent abroad by tourists, there were very heavy expenditures in the areas of defense and foreign aid. He appreciated the action taken by the Bundestag in the ratification process of the Franco-German Treaty. What primarily concerned him, however, was that we would find ourselves in a situation like that of the British in the Common Market negotiations, where the French would insist on trade arrangements which the others in the Community would accept rather than see the Common Market destroyed; the Community would then enter into negotiations with the U.S. on a basis which would put us in a disadvantageous position. Unless Europe approached these trade negotiations in a way which would enable us to protect our balance-of-payments position—after all, the President interpolated, we did have a favorable balance of trade—we would be in difficulty. The President appreciated the declaration in the Treaty ratification by the Bundestag and hoped it would serve as a guide in the trade negotiations over the next 18 months. It was important not to let the French dominate these negotiations and end up by putting us in a position where we would be almost forced to withdraw from Europe, and then have the French say they had predicted this development all along.

Dr. Krone said that the Bundestag declarations in the preamble to the Treaty ratification, when enacted, would have the force of a law fully binding on the government. This would therefore establish very clearly the future course of German policy. The Germans had done things this way expressly in order to allow no room for doubt as to what this course would be. He wished to express his agreement with the President that the main concern was the balance-of-payments problem and not the farmers. Dr. Krone said we (the Germans) also have our worries about the French, since it is clear that they wish to protect their own agricultural system and make it dominant in Europe. He nevertheless felt that some progress had been made recently in Brussels toward a satisfactory solution through the efforts of Ministers Erhard and Schroeder. The Germans were in any event fully aware of what the Kennedy Round means for all of us.

The President said that in any case we did not wish to create any new farmers. Dr. Krone said he completely agreed.

1. “Balance of Payments and Trade Problems.” Confidential. 3 pp. Department of State, Central Files, FN 12.